Additionally the new hype word "Cloud" made me want to add some comments to
that as well. Specifically, as my possible new boss, Larry Ellison calls it
"vapor water".

So, let's start with some basic facts, that I think, are important to
understand what I'm trying to explain:

Moore's Law

Software needs

The first point I guess needs no further commenting. Still the second point
needs it. I did not perform a precise analysis, but it seems obvious
(discussion point one!) that the needs that software versions add to the
previous version are now outpaced by Moore's Law. Will say: Hardware gets
faster quicker, then software needs grow. One simple proof for that is the
fact, that most servers in datacenters nowadays are utilized only around or
below 15%, and another important proof is the rapid uptake of virtualization
techniques.

In September 1990 there was a famous
15 year anniversary edition titled "Byte Magazine 15th anniversary summit,
setting the standards" of the Byte magazine,
which did try to shade an outlook into the next 15 years of the computer
industry and its development by asking the 63 most influential people of the
time to look back and from that predict the future. Sadly, Byte was torn down
in 1998, and although it did continue as a web-presence for some years, it is
no longer available, and had been removed from the web in February 2009. So
also the link above no longer works.

A link to the table of contents of that edition at least can be found here.
The cover
page is here. And some of the predictions published in that issue can be found here (that
page calls it a brief excerpt, sadly I dumped all my paper versions of Byte
approx. 10 years ago into the bin in the hope of it being online forever. How
naive, wrong and mistaken have I been... ;-( ) (discussion point two) (and:
btw: I'd like to get a copy, if anyone can spare his/hers).

In that discussion, many diverse topics had been approached, and had been
answered by many but not all of the 63 people. One of those was Donald
Knuth, creator of the programming language Pascal. He is cited with:

Donald Knuth: ...computers are going to double in speed every year until
1995, and then they're going to run out of ideas.

How wrong has he been...

And as a proof point to my second topic above, I'd like to quote Mr
Kernighan, inventor of the famous programming language C:

What about the software side of the equation? Or are all the changes coming
in hardware?

Brian Kernighan: Software, unfortunately, is not nearly as easy to make go
better as hardware seems to be. And the software will not get better fast
enough, and so you'll piddle away more and more of [the power] on stuff that
doesn't quite work the way you want it to....

And then there was the question:

What is the biggest obstacle to major new breakthroughs in computing?

In a word, software, not hardware.

Suffice it to say, that I assume these predictions from close to 20 years ago
a valid proof point for my thesis, that software didn't grew and doesn't grow
in demand as quickly as the hardware grew and still grows in speed and
capabilities.

After this short deviation into the past using a look into the most important
publication of that era back to the question on why the IT industry is in the
state that it is in today.

It seems obvious, that some (shall I say: many?) have miscalculated the
differences in development speed between software and hardware. Or assumed,
that the overall demand for compute power might still ramp up and make up for
the growth in produced CPU capacities to still be able to sell as much (in
Dollars) as before (that would have required to sell way more units then
before). It did work for quite a while during the gold-rush era of the early
21st century and the dot-com bubble, where many new enterprise were created
that used the internet and needed CPUs like crazy. But it also seems obvious
from this fact, that hardware is becoming more and more of a commodity,
because the average cost per CPU-cylce needed to solve a specific problem goes
down and down. My favorite statement here is, which I use often in
virtualization talks, and now in cloud talks: "Take your mobile phone out
of your pocket, look at it, and remember: NASA had LESS CPU power (in total)
to savely bring mankind to the moon and back compared to what you look at
right now."

That then sets the stage for open and candid discussions on the state of
virtualization, cloud computing et. al. But, again, more on that later.